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Actavis (Photo credit: Wikipedia)

A closely watched campaign to create state laws for biosimilar substitution, which has so far been rejected in 10 states and gained little traction elsewhere, took a controversial step forward when a bill was overwhelmingly approved by a California assembly committee.

At the same time, though, the board of the California Public Employees’ Retirement System, which manages the largest public pension fund in the US, voted to oppose the measure on the grounds that the language may restrict the ability of consumers to obtain lower-cost biosimilars.

The multi-state push to generate new laws on substitution is the result of an aggressive lobbying effort by biotechs, notably and Genentech, to protect their lucrative franchises and blunt the inroads that biosimilars are expected to make in the marketplace..

Their campaign, which would draw clear lines for allowing substitution, began earlier this year even though the FDA has not yet approved a biosimilar or decided whether a biosimilar is interchangeable with a brand-name biologic. Many biologics are priced at tens of thousands of dollars a year and once biosimilars become available, the debate over cost is expected to accelerate.

In general, the bills propose that a biosimilar must have been deemed by the FDA to be interchangeable with the prescribed medicine for the specified use. Typically, the bills would give doctors authority to specify ‘do not substitute’ on prescriptions, and an option to override any policy from third-party payers or state laws that would have substitution be the standard or default practice (back story).

To date, the lobbying effort to place restrictions on substitution has succeeded in just four states, although three of those states – Oregon, Virginia and Utah - passed bills that contain sunset clauses that will likely restrict provisions before biosimilars come to market. Only North Dakota has passed a law without such a clause (here is the state-by-state tally).

The legislative effort in California, however, is being closely watched because the state is not only large, but is often seen as a bellwether for pharmacy practice. California, for instance, is the only state to have passed a comprehensive track-and-trace law for monitoring drugs as they travel through the pharmaceutical supply chain, although it does not take effect until 2015.

Moreover, Amgen and Genentech are both based in California, and so the legislative effort there is being seen as a litmus test for their political muscle. This is one reason why the Generic Pharmaceutical Association, which represents generic drugmakers, was delighted that the Calpers board voted to oppose the legislation (read the Calpers explanation here).

The California legislation requires pharmacists to notify prescribing doctors of a substitution of any drug - biologic or biosimilar - and enter that into a patient record system shared with doctors within five days (here is the bill). In an analysis, Calpers decided that this requirement would prove burdensome to the point that biosimilar use may be mitigated and, as a result, prevent payers from recognizing lower health care expenses.

"The physician notification could encourage doctors to check the ‘Do not substitute’ box to avoid being inundated with notifications. Furthermore, doctors may develop a habit of just checking the ‘Do not substitute box for all prescriptions which may go beyond biologics and negatively impact CalPERS ability to increase generic drug use," the analysis states.

Supporters argue such reasoning is flawed, because the bill does not prohibit substitution. “The opposition is rooted within its proponents’ experience solely in this small molecule traditional pharmaceutical environment, and is based on erroneous assumptions from a dated model that simply does not apply to biosimilars,” Paul Bisaro, the ceo at , wrote in a letter earlier this summer to a California assembly committee.

Actavis, by the way, is one of the largest generic makers, but has supported the legislative effort around the country, in part, because it has deal with Amgen to develop certain biosimilars. (The deal was actually made with Watson Pharmaceuticals, which Actavis acquired). An Actavis spokesman maintains the company, which is also developing its own biosimilars, supports the legislation because "it is the right thing to to."

At some point states will have to pass some form of biosimilars law or there will be no use of biosimilars within their state, according to a spokesperson for Actavis. He adds that, since each state controls the practice of pharmacy within its borders, an FDA determination of substitutability is critical, but so is the state allowing substitution.